Well, after one day I'm $1000 up, nice 
Property is a Poor Investment?
- Thread starter WASP
- Start date
Woops, make that $200 AUD up
?????
Cheers,
The Y-man
As soon as I wrote that I knew someone would point out that ASX is in record territory.
While I have only a small stake in BHP, it is indicative of my portfolio. Got back 30k today, which sounds impressive, but that is only 50% of recent losses. And I didn't have enough freeboard in my broker accounts to take advantage of the lows in my favourite stocks. I don't own banks and Telstra.
Get used to it. We'll have parity with the USD sooner rather than later. Big call and strictly IMHO only.
HSBC is one of the biggest banks in the world and lists in multiple places: London, New York, Hong Kong, etc. It's into everything: investment banking, funds management, retail banking, commercial banking, etc.
Depends on how big Cendrillon's portfolio is, I suppose. If his portfolio is $50k, a $30k bite is pretty chunky. If his portfolio is $500k, $30k isn't much. Especially when you're dealing with a blue chip diversified bank like HSBC.
Alex
Cendrillon, how old are you? Things change. You'll need a lot more money in a few years once you have a family. If you think you can still live on 40% of your current salary once you have a wife and kids, you're nuts. The house, the car, kids' educations..... Besides, if you retire you're going to be eating part of your returns as income, and you still have to reinvest enough to beat inflation.
I wouldn't put away those suits just yet.
As for the AUD.... again it depends on your circumstances. I'm making GBP, which is still worth $A2.50 (only about 10% down over the last couple of years) and HKD $15. I wouldn't expect the AUD to stay high, though. When the commodities boom cools....... I'm seriously thinking about investing directly in US shares to get some long USD exposure.
Alex
His posts indicated to me that the 30K was his portfolio.
Yep, it's innevitable sooner or later. Just remember who has 70% of the world's uranium
We'd better start building nukes to protect ourselves once the US finishes robing the arab states of all their oil.
We'd better start building nukes to protect ourselves once the US finishes robing the arab states of all their oil.
Hi Alex,
Indeed retiring on my current spending isn't exactly the plan, but it's comforting to know that in principle you could retire. The 2.7 year figure includes keeping pace with inflation BTW
Indeed retiring on my current spending isn't exactly the plan, but it's comforting to know that in principle you could retire. The 2.7 year figure includes keeping pace with inflation BTW
Woops, make that $200 AUD up
Sorry, maybe I'm dumb but I don't get it. If you have $30k cash why don't you invets in property? maybe it's just a personal thing. You have more fun playing the share market.
I bought a block of land in early dec and settled mid jan. It was 100% financed against equity. I didn't spend a single cent. If I was to sell it tomorrow, I'd make about $25k gross profit. How many % return is that on investment? and exactly how much $$ did I make in the time that I actually owned the land...well owned it for about 2 weeks now.
Well, actually it will cost me tos ervice the loan but still I won't need to outlay as much as $30k. In 6 mths time, when I have put a house on it, it will be worth much more. I can then choose to either rent it out and sell it. So eventhough my outlay maybe approx $15k in mortgage repayments, this will be offset by the capitak growth.
It's also not as volatile as shares. It won't decrease by $25k say in at least 3 mths if at all. Which will give me plenty of time to sell if I wanted to.
I just hate having to check the ASX all the time to see how my shares are faring. I can be up 20% in 3 mths and won 20% 3 mths later. So far, properties have only kept going up or remained constant.
Also, property is the only investment where you can make money with literally no money. I'm not sure if you can do that with shares. I mean, it was probably 80% luck at the time but we still took the initiative. I'm talking about no deposit, no repayments, literally no money invested but made money from property.
Cendrillon believes, based on his spreadsheets, that the holding costs involved in IPs erodes the supposed high returns from capital appreciation. i.e. property investors actually make a lot less than we think.
Apparently we IP investors who have made gains are actually deluding ourselves and we could have made more had we invested in other asset classes.
In Cendrillon's particular case, since he is a non-resident for tax purposes and has no plans to return to Oz, he doesn't get the tax benefits.
Alex
Apparently we IP investors who have made gains are actually deluding ourselves and we could have made more had we invested in other asset classes.
In Cendrillon's particular case, since he is a non-resident for tax purposes and has no plans to return to Oz, he doesn't get the tax benefits.
Alex
Darn!
I better give all that Capital Growth up and sell out.
How silly of me not to have gone into shares
Hi Sue,
This is the thing that gets me about property investment, and people that invest in property (myself included).
Alot of the time we base our investment decisions on beliefs that are not necessarily true like 'property never goes down' (had a look around Sydney lately?), there's no risk (tell that to the people forced to sell at loss during the last recession), the holding costs are virtually nothing (well 15k actually...), I doubled my money in only a year (ignoring the 15k spent on mortgage payments, CGT, agent's commissions etc.).
So did you make $25k profit, or actually $10k? That is, have you subtracted your holding costs? And I know you used equity from your home, but you also could have invested the same money in shares, so the opportunity cost is the same.
e.g. if you drew down 30k from your home, purchase land for 30k, pay 15k holding costs, then sell for 55k, then your profit is 10k, and your investment is 45k. You shouldn't consider that you invested only 'virtually nothing' andmade 25k profit, it's not accurate.
Now that's not to say that you can't make money in property, but what is it that caused the land you bought to go up so dramatically in 2 weeks?
"I'm talking about no deposit, no repayments, literally no money invested but made money from property."
So which is it, 15k for repayments, or no repayments? Personally I consider 15k alot of money.
Perhaps you have some special ability in purchasing land that appreciates so rapidly in a housing market that is basically flat. Is there some secret to this, or can you just buy any normal piece of land and expect such significant returns? (That's an honest question!).
As for building a house, the expense is significant, the holding costs are large, and the capital outlay and risk of getting a dodgy job from the builders. It seems mighty risky to me. But that's just my opinion, how do you see things?
Personally I like the simplicity of loging onto the internet and purchasing shares within 2 minutes, then selling whenever I like and paying only 0.125% commission (plus no CGT!). My case is particular though since I'm out of the country, so supervising a construction job is not exactly something I want to do right now.
But I am very interested to hear more about your land investment experience. What kind of land did you buy? What was the cost of the land itself? Is the growth rate you achieved significant? How much are your entry / exit costs (including CGT and land tax)?
Also, how is it that you know you've made $25k when you've only had the property for 2 weeks? Where did this figure come from, are you sure you could get it in the market?
For me, I'm only really certain of my profit after I sell, before that it's just speculation. That's one comforting thing about shares, at any point in time you know the market value of what you have.
On checking the stock market every day, no one is forcing you to do this. It's just like property, you can look at the listings each weekend to try and figure what your house is worth, but you can also just find a solid company and buy and hold for the long term.
And not all stocks go up and down 20% from month to month. There are many stable stocks out there that give solid returns aswell.
I guess I've always seen buying land as speculation, and as such a bit of a gamble. What do you think?
This is the thing that gets me about property investment, and people that invest in property (myself included).
Alot of the time we base our investment decisions on beliefs that are not necessarily true like 'property never goes down' (had a look around Sydney lately?), there's no risk (tell that to the people forced to sell at loss during the last recession), the holding costs are virtually nothing (well 15k actually...), I doubled my money in only a year (ignoring the 15k spent on mortgage payments, CGT, agent's commissions etc.).
So did you make $25k profit, or actually $10k? That is, have you subtracted your holding costs? And I know you used equity from your home, but you also could have invested the same money in shares, so the opportunity cost is the same.
e.g. if you drew down 30k from your home, purchase land for 30k, pay 15k holding costs, then sell for 55k, then your profit is 10k, and your investment is 45k. You shouldn't consider that you invested only 'virtually nothing' andmade 25k profit, it's not accurate.
Now that's not to say that you can't make money in property, but what is it that caused the land you bought to go up so dramatically in 2 weeks?
"I'm talking about no deposit, no repayments, literally no money invested but made money from property."
So which is it, 15k for repayments, or no repayments? Personally I consider 15k alot of money.
Perhaps you have some special ability in purchasing land that appreciates so rapidly in a housing market that is basically flat. Is there some secret to this, or can you just buy any normal piece of land and expect such significant returns? (That's an honest question!).
As for building a house, the expense is significant, the holding costs are large, and the capital outlay and risk of getting a dodgy job from the builders. It seems mighty risky to me. But that's just my opinion, how do you see things?
Personally I like the simplicity of loging onto the internet and purchasing shares within 2 minutes, then selling whenever I like and paying only 0.125% commission (plus no CGT!). My case is particular though since I'm out of the country, so supervising a construction job is not exactly something I want to do right now.
But I am very interested to hear more about your land investment experience. What kind of land did you buy? What was the cost of the land itself? Is the growth rate you achieved significant? How much are your entry / exit costs (including CGT and land tax)?
Also, how is it that you know you've made $25k when you've only had the property for 2 weeks? Where did this figure come from, are you sure you could get it in the market?
For me, I'm only really certain of my profit after I sell, before that it's just speculation. That's one comforting thing about shares, at any point in time you know the market value of what you have.
On checking the stock market every day, no one is forcing you to do this. It's just like property, you can look at the listings each weekend to try and figure what your house is worth, but you can also just find a solid company and buy and hold for the long term.
And not all stocks go up and down 20% from month to month. There are many stable stocks out there that give solid returns aswell.
I guess I've always seen buying land as speculation, and as such a bit of a gamble. What do you think?
Alex,
I'll agree that once you have negative gearing on your side property will suddenly become a very attractive option.
For example, a 1% growth per year at 95% LVR corresponds to 20% growth. If the holding costs are halved (courtesy of negative gearing) then that 20% will jump up to 40%. Fantastic, I agree.
As I've said, at the right time property can be fantastic. The gearing is excellent, and if you can find something that neutrally gears from the start (as in your case) then your return is infinite (no money down, free profit). But this is certainly not the case in today's market.
Given that property now is quite overpriced, and the holding costs are significant, it makes sense to look at alternative investments, like shares. As a few others have mentioned, by drawing down equity from your property and investing in shares you can actually reduce your holding costs aswell.
I think a well educated investor would be open to all investment vehicles instead of blindly espousing the benefits of one, and not understanding why anyone would want to invest in anything else. The truth is, if you'd invested in shares over the last 3 years you would make alot more than in property.
All markets have cycles, the more investment vehicles you are familiar and competent with, the more opportunities are out there for you. If you ask me, investing in shares beats doing nothing while waiting for the property market to make economic sense again. And buying property now, unless you find a real bargain, would be a mistake.
And Ani, your comment is quite stupid, shares have capital growth too. The main benefit of property is gearing, no capital growth.
I'll agree that once you have negative gearing on your side property will suddenly become a very attractive option.
For example, a 1% growth per year at 95% LVR corresponds to 20% growth. If the holding costs are halved (courtesy of negative gearing) then that 20% will jump up to 40%. Fantastic, I agree.
As I've said, at the right time property can be fantastic. The gearing is excellent, and if you can find something that neutrally gears from the start (as in your case) then your return is infinite (no money down, free profit). But this is certainly not the case in today's market.
Given that property now is quite overpriced, and the holding costs are significant, it makes sense to look at alternative investments, like shares. As a few others have mentioned, by drawing down equity from your property and investing in shares you can actually reduce your holding costs aswell.
I think a well educated investor would be open to all investment vehicles instead of blindly espousing the benefits of one, and not understanding why anyone would want to invest in anything else. The truth is, if you'd invested in shares over the last 3 years you would make alot more than in property.
All markets have cycles, the more investment vehicles you are familiar and competent with, the more opportunities are out there for you. If you ask me, investing in shares beats doing nothing while waiting for the property market to make economic sense again. And buying property now, unless you find a real bargain, would be a mistake.
And Ani, your comment is quite stupid, shares have capital growth too. The main benefit of property is gearing, no capital growth.
Dunno about that..Perth (and WA) has been "great" over this period (3 years) and giving me nearly an extra $400k in Equity just over the last 12 months (Now is the ime to lock this in for me and look at my options).
All the best with HSBC
I'm off soon for another IP hunt and then ome more shares
Congratulations. (Yes, I mean it!) But is it repeatable? I made over 30k today, but I'm not confident that I will do it tomorrow.
I'm a weekend golfer who has been known to hit a screemer on occasions, but it isn't repeatable.
I assume you don't drive your car looking in the rear-view mirror, so why is it appropriate to invest in yesterday's winner? Tomorrow is a brand new day. Scorn the Gambler's Fallacy.
I am not faulting your investment strategy, merely suggesting that no two days are the same. Peace!
Hello,
That was quick. Why so many questions? my head hurts and I've had a lomg day so will endeavour to reply your questions later.
I agree with you that an investor should be open to all options. I have shares too but they haven't performed well....actually very poor.
I know my block has increased in value because although the Stage which I bought in have sold out, the block next to mine has come back on the market due to finance. The developer has re-priced it much higher. It's quite a large developer (I think in the top 50 on ASX) and they do not give discounts on land. Especially when there's a shortage of supply in Brisbane. It's probably sold already.
Well, the holding costs are high and some builders are shonky but we have had enough experience to avoid those type of builders. I find building a very conservative approach to property investing. There's no speculation involved because sell prices and standards are already set in place by other builders. I also enjoy it and it's not very time consuming.
I would never sell land because of high CGT unless the profit was really good. But we do sell every now and then and we don't have a PPOR so we can claim at as our PPOR.
We finance everything, the land, the house, the stamp duty, even enough to cover repayments so technically we are not spending any of our own money. Once it's finished and rented out, we usually aim for a ROI of 7%+.
That was quick. Why so many questions? my head hurts and I've had a lomg day so will endeavour to reply your questions later.
I agree with you that an investor should be open to all options. I have shares too but they haven't performed well....actually very poor.
I know my block has increased in value because although the Stage which I bought in have sold out, the block next to mine has come back on the market due to finance. The developer has re-priced it much higher. It's quite a large developer (I think in the top 50 on ASX) and they do not give discounts on land. Especially when there's a shortage of supply in Brisbane. It's probably sold already.
Well, the holding costs are high and some builders are shonky but we have had enough experience to avoid those type of builders. I find building a very conservative approach to property investing. There's no speculation involved because sell prices and standards are already set in place by other builders. I also enjoy it and it's not very time consuming.
I would never sell land because of high CGT unless the profit was really good. But we do sell every now and then and we don't have a PPOR so we can claim at as our PPOR.
We finance everything, the land, the house, the stamp duty, even enough to cover repayments so technically we are not spending any of our own money. Once it's finished and rented out, we usually aim for a ROI of 7%+.
Oh you might be surprised. I bought a house in Perth in 2004. The bank valued it at 80% above what I bought it for last year. That's the bank willing to lend me cold hard cash on the basis of the value of the property. Which means a buyer who wanted to buy it off me would have gotten the same valuation from the same bank.
Not to mention I did a 105% LVR loan for that property. So my returns have been 80% on maybe 4-5% negative cashflow.
If you believe in shares, you must also realise there are DIFFERENT cycles in shares. Banks do not move up together with mining companies, etc. The same with property. Sydney has been dead since 2003, but Perth has been going crazy. Melbourne and Brisbane have been relatively flat but not falling.
Alex
Congratulations. (Yes, I mean it!) But is it repeatable? I made over 30k today, but I'm not confident that I will do it tomorrow.
I'm a weekend golfer who has been known to hit a screemer on occasions, but it isn't repeatable.
I assume you don't drive your car looking in the rear-view mirror, so why is it appropriate to invest in yesterday's winner? Tomorrow is a brand new day. Scorn the Gambler's Fallacy.
I am not faulting your investment strategy, merely suggesting that no two days are the same. Peace!
Not for this particular deal. But I'm not really after the growth in land price, it's just a bonus. I am developing the block.
I think it is repeatable even after the housing market goes flat. There are many builders out there doing this as a business and I am sure they won't stop even after the market becomes flat. I have already been doing this for 4 years.
Good point about Perth Redwing.
It's true that there is probably always a booming market somewhere if you look hard enough
It's true that there is probably always a booming market somewhere if you look hard enough
